Building a gold mine from nothing in South Africa has become close to unheard of, in a country that now attracts less than 1% of the world's mine exploration spending. Sibanye-Stillwater's board has approved one that is not from nothing. Burnstone sits near Balfour in Mpumalanga, about 80km south-east of Johannesburg, where a Canadian company sank the shaft, poured first gold in 2010 and gave up in 2012 after flooding and a shortage of developed ore. Sibanye inherited it in its 2014 takeover of Wits Gold, and the decision to restart was disclosed in its half-year results on 1 September.
What survived the failure is the expensive part. The vertical shaft and the decline are standing, and the fleet of machines that works underground is still there, which is why mining can start next year instead of in a decade. Ralph Lombard, who runs projects for the company, said the build carries on to 2029 with ore stockpiled until the processing plant starts in the first quarter of that year.
The R98 million that is not the whole number
The board approved R98 million for Burnstone this year, and that covers project setup and recruitment rather than construction. The company's own figures put infrastructure capital at about R3.5 billion and pre-production capital at about R2.5 billion through 2028. News24 puts total project capital at R6.2 billion.
Sibanye values the project at about R19.2 billion and puts its return at roughly 36%. Burnstone works the Kimberley Reef at an average depth of about 550 metres. Driefontein, the company's deep mine on the West Rand, sends 7 000 people a day down through infrastructure that is decades old. Richard Cox, who runs the Southern African operations, said the point is reserve replacement and a shallower, lower risk ounce to offset depletion from those deep conventional mines.
The industry it is restarting into
South African gold has been shrinking for a decade. Minerals Council figures put employment in the sector at just under 120 000 people in 2014 and a little over 90 000 by 2024, with annual production falling by about 40% over the same years. Sibanye's own gold output fell 2% in the half, and its underground mining went down further than that.
At steady state Burnstone is planned for roughly 130 000 ounces of gold a year and about 2 500 jobs. The 25-year mine life attaches to a reserve of 2.7 million ounces. Lombard was explicit that the larger resource sitting behind it is not part of that number, and would only open up if the first phase works.
Gold is doing the arguing for now. It trades above $4 400 an ounce, and Bloomberg reported this week that Amundi, Pictet, Robeco and Fidelity have all rebuilt positions they cut earlier in the year. Those managers can sell theirs on a Tuesday. Sibanye's version comes out of the ground near Balfour from next year.
